Don’t Represent Jerks in a Short Sale

Even more than usual, you need to be able to rely on your seller in a short sale.

When you are short selling a home, there is great deal of material that has to be gathered by the sellers for the short sale package. It all has to be accurate, with no misrepresentations, in order for the mortgage lender to accept the short payment.

You have to stare down the bank and stop the foreclosure, with the assistance of the sellers contacting the bank. You get to go through the foreclosure version of waterboarding as the lender takes the property right up to the sale date, then postpones it.

The sellers have to understand, and accept, the tax consequences of the short sale and not change their minds.

The sellers have to get nothing out of the short sale, then move out gracefully. If they try to get money out of anyone at the time of closing, it can be a misrepresentation as they have told the lender that they are walking away from the short sale with nothing. Although, some lenders are allowing the equivalent of moving assistance to the seller, so this may be getting better. If this comes up, you might consider having someone buy some furniture from the seller to give the seller the funds to move in separate transaction from the short sale.

In essence, you need to pick good people to work with. Short sales are difficult enough. If you represent a jerk, you get all the features of hell without the inconvenience.

I act as a short sale consultant for Realtors all over America. In the Triangle of North Carolina (Raleigh, Durham, Chapel Hill and lots of smaller towns like Cary), I get to select my own clients, and I try to choose wisely. But, when I am a consultant, I do not get as much input in chosing the clients as I would if I interviewed them myself. A delightful agent that I have known for many years asked for my help in an extremely complicated short sale and did not want to go through the Realtor training or Realtor education to learn how to short sale on such a complicated transaction. It took months. We got to avoid foreclosure three times, getting it postponed at the last minute each time, because the seller cannot pay the mortgage. The seller was able to sell a home for $1,500,000 when it had four liens and unpaid taxes that added up to about $2,100,000. Much of the unpaid debt was completely cancelled. Yet, he yelled at me when the judgment debt that was the fourth lien was only released as a lien on the property and not completely cancelled. We were only able to get the three preceeding lenders who were not getting fully paid to let us pay $5,000 on a $15,000 judgment. At first the creditor who had this judgment was so angry at the seller that he would not settle at all, but his attorney persuaded him it was better to get some money out of the seller’s only asset. When you figure that second loans of $250,000 are frequently settled for $2,500, you will understand what an accomplishment getting $5,000 to a fourth lien was. But, it was not good enough.

He insisted on documents being hand carried to him for his review, with deliveries made by the Realtors. When it came time to close, the seller would not even go to the escrow office to sign the papers at the proper time. The escrow was delayed due to his delay. Then, he would not agree to move out when the escrow closed. He wanted money to pay for moving and storage, and he wanted to stay in the house he was sellling for two weeks, rent free. Possession was supposed to be delivered at the close of escrow, not two weeks later. We worked out the money by selling some furniture at a public auction. The buyer was amazingly gracious on the move out date, but the seller made it difficult for the buyer to bring contractors to the house to measure for future work. I had everyone prepared to have to evict the former owner, but he moved out on his own.

Learn from my experiences. If the sellers are not truly fine people who deserve to be rescued, do not rescue them. So, if you have a hard working family in Garner or Knightdale, North Carolina, take good care of them and they will treat you well, But, I learned in lifeguard training that you can swim up to help someone who is going down and they can take you down with them. It is a tough time for the seller, so you do have to put up with a great deal to provide a needed service. But, do not sign up to be abused.

One of the reasons to do short sales is to get undying loyalty from clients and referrals of all their friends. If the client is the “south end of a north bound horse”, most of their friends are probably jerks. Do you want to spend your life working for people like that?

Pick your clients wisely, rescue the good people and help save America from the financial crisis. But, there are some people you should walk, no run, away from.

Comments

This is my first short sale attempt. I have never done before but I am going to learn. I am working with a client that must sell her home with a short sale. However, it took me 3 days of constant calling the bank to talk to someone to give information about doing a short sale through their bank. A receptionist told me to go to the bank’s website and pull the short sale package from their site, complete and return. When I opened the website…there was nothing specific that referred me to short sales, forms nor package. It seem such an easy task. Here it is the fourth day, and I’m still looking for those short sale forms. The bank is wearing me down. I’ve been on the phone holding the line for some to pick up only to be told that they can not help me and that I have the wrong department. I do have a sweet lady for a client and do want to help her. So Monday, I will go directly to the bank until I find the forms that my client must complete. Tell me, do you have any knowledge about where or how to find these short sale forms? Please advise.
Maria

Go to the bank’s website and look for terms like “short sale package”, “loss mitigation” or “short sale”. They will normally have some reference to their forms and what they want. If not, just put together a standard short sale package and submit it. When they review it, they will ask for anything that you do not have in the package. It is better to get the package perfect the first time, as it goes through quicker. However, if you cannot find what they want in their package, just submit something reasonable and respond to whatever they ask for after that.

This is truly good advice. I’ve learned this lesson the hard way and now I abide by the rule — I don’t ignore my first impression. Although I love to help people, I’ve had to learn to limit my impulse to help. Some people are committed to taking you through the fire with them. Others are so angry at what the bank has put them through during the loan modification process that they are determined to spread the pain. And then other people (the vast majority) are simply a dream to work with. I prefer to work with the latter.